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The EUR/USD was sold-off yet another day on Tuesday, with the rate exchanging hands below 1.30 for the first time since May 30.

Portugal political turmoil, USD strength weighs on the EUR

The EUR crawled lower assisted by fresh offers, courtesy of strong USD inflows and additional woes concerning the state of political affairs in Europe, where a second minister resigned in Portugal. Besides, the IMF threatened again to delay the next aid tranche to Greece. All in all, the fundamental headlines were not sympathetic with EUR buyers last Tuesday, eclipsing a much-better-than-expected Spain unemployment number, mostly due to seasonal factors.

As Adam Button, Editor at Forexlive, notes: "We're waiting to see how the junior member of Portugal's coalition reacts after the foreign minister resigned to protest the replacement for the finance minister (who resigned yesterday). Prime Minister Coelho said he will fight to keep the government together but without support from the CDS-PP, an election is inevitable. So far, leaders haven't made a statement but a 33 bps rise in Portuguese 10-year yields today indicates an election could be close."

Key data to be released in the U.S.

In Europe, second-tier economic releases, including EU-broad services PMIs and retail sales, will be published. However, the main focus is in the U.S. With no Fed members due to speak until July 12, the sentiment will be strongly data dependent to dictate the market's vision on the 'hot topic' of tapering. ISM services, ADP and jobless claims are all due later today.

According to Kathy Lien, Co-Founder at BK Asset Management, "For the U.S. dollar to hold onto its gains, all that is needed is for these releases to meet expectations but in order for EUR/USD to drop through 1.2950, an improvement needs to be seen in both the headline ISM non-manufacturing index and the employment component of that report. If service sector activity slows or worse, employment conditions contract, the dollar could give up its gains quickly. Also, considering that many U.S. investors and traders will be taking a long weekend tomorrow, if the data misses expectations, we could see a heavy reversal of USD."

EUR/USD remains a sell on strength - 2ndSkies

Looking at the EUR/USD prospects, in view of Chris Capre, Founder at 2ndSkies, "The trend is still bearish, but liquidity is pulling out of the market, so moves may be more measured ahead of the July 4th US holiday." Capre is considering "shorts on pullbacks towards 1.3060 targeting 1.2850 and 1.2775 which is the major support level for the year." Capre advises "to trim positions ahead of the holiday if you are in profit."

Source: EUR/USD Depressed Below 1.30